Natural justice in assessment: denial of cross-examination over third-party records can vitiate the assessment.

Where an assessment rests on third-party computer records or statements and the assessee specifically disputes attribution of the transactions, the Department must establish that the purchases were made by that assessee. The assessee is entitled to a meaningful opportunity to test the material relied upon through cross-examination of the persons whose records or statements form the basis of the assessment. Refusal on the ground of delay is not justified where the denial itself causes prejudice. On these facts, the lack of cross-examination amounted to denial of effective defence and the assessment could not be sustained.

---

---

Issues: Whether denial of an opportunity to cross-examine the third party whose records formed the basis of the assessment vitiated the assessment order.

Analysis: The assessment was founded on computer records allegedly collected at border check gates, which named a dealer identical to the assessee. Once the assessee specifically disputed that it was the purchaser and asserted that another establishment of the same name existed, the Department was required to establish that the purchases were in fact made by the assessee. In such circumstances, the assessee was entitled to an effective opportunity to test the material relied upon by the Department through cross-examination of the alleged sellers. The refusal on the ground that it would prolong the proceedings was unjustified. Given the long lapse of time, a remand for fresh cross-examination was no longer practical, and the denial of opportunity had already caused prejudice.

Conclusion: The denial of cross-examination amounted to denial of an effective opportunity of defence and the assessment could not be sustained.

Ratio Decidendi: Where an assessment is based on third-party material or statements and the assessee specifically disputes the attribution, denial of a meaningful opportunity to cross-examine the persons whose material is relied upon violates natural justice and vitiates the assessment.

---